A Comment -- General Comments From an Expert (A Commentary)

Global Equity Markets. You have to expect volatility in the coming years because of instability. The last time there was a deleveraging cycle was from 1930 to 1934, when Dow Jones made basically nothing. There were still rallies within that. It will take time. Expectations of 10%-20% returns that we saw in the 80s and 90s aren't going to happen again. Investors have to think about 2%-3% real returns on their equities and it will take a while. It could be another decade of really slow growth.

Optimal equity market for a Canadian investor in non-Canadian equities as a percent of total? For his clients, about a 3rd of their stocks are Canadian, 20% US and the rest are international.

Earnings season is coming up and we want to see what managers are seeing about regional economic outlooks. Alcoa will have a feel for what is going on in the regions but they will not be a bellwether right now because copper is quite low. The commodity stocks have already factored in a slowdown in China. If they continue at 7-8% then things should be ok for resource stocks.

Markets. Down again because of Europe. Concern is on the increasing yields on 10 years for both Italy and Spain. Spain has a majority government right now so it is unlikely that it is going to be the same crisis that we experienced with Greece, but nonetheless, there is concern about Europe and a slowing economy and the potential of other bailouts.

Oil. In spite of the fact that we have some potential for shale oil, it is really not an investable alternative right now. Last August was the highest demand ever recorded. Right now it is a little weak because we have very good inventory numbers but the reality is, that market is shifting East. Demand continues to go up and supply struggles.

Junior oils? Would look to a Bellatrix Exploration (BXE-T), Tourmaline (TOU-T), Painted Pony (PPY.A-X) or Black Pearl (PXX-T). Would look at these, especially if world economic activity picking up.

Markets. A correction is well underway and the TSX is back where it was last fall. Resource stocks are tied into the global economy. If emerging economies are slowing, that pulls resource stocks off. At some point, you are halfway through the bottoming stage.

Markets. Starting to warm up to precious metals. Likes the way the stocks have started to act relative to the commodity. Feels they are in the process of bottoming. Expecting a slow down, first of all in China, which you are already seeing and will likely continue to accelerate down.

Economy. Likely will see quantitative easing later this year. Losses from real estate debt globally are running $40-$50 trillion. A couple of trillion here or there on the Fed’s balance sheet isn't going to make a lot of difference. Growth for the last couple of quarters in the US is very sub-par compared to a more traditional recovery.

Market: We got to a point recently where just over 70% of global stocks were participating in the rally, then markets except North and South America backed off. He prefers to stay with the things that are working. If you look at S&P without Appl, it is not doing that well. You want to be careful with some of the laggard groups.

He spends a lot of time focused on generating yield. Don’t look for the highest dividend yield; You make money on a REASONABLE dividend with growth over time.

Oil. Everybody is concerned about weakness in natural gas. Oil stocks are also going to get hit. Oil prices are around $103 and have been up to $110. Everyone has been building inventories because of disruption concerns in the Middle East if the Strait of Hormuz gets closed. US inventories are now up 12.4 million barrels. OPEC is producing about 90 million barrels. Aemand in winter is about 88-88.5 million. In the spring, demand goes down by about 1.5 million barrels. Right now there is about 3 million barrels a day production greater than demand. Everybody is getting to the point where their strategic reserves are full and their commercial reserves are getting to capacity. If OPEC does not cut back, there will be a glut of oil. Expecting oil will go back down to the mid-$70 this summer if there is not an incident in the Middle East. US has 97 days of inventory where they normally should have 82. About me another tough year in 2013 and once we get through this, there will be another energy cycle started. If demand grows to 1 million-1.5 million a day in each of the next few years,there will be much higher oil prices and also, hopefully, natural gas also gets resolved.

Natural gas. If a company is producing liquids rich natural gas, they sold the liquids and are prepared to give the natural gas away almost nothing. Everyone in the US that is producing liquids rich natural gas is getting about $2.10 and may be willing to take under $2. AECO is about $1.58-$1.59 and the price could break $1. Historically, you get a bounce between August and November and he expects that somewhere in that window there will be a bottom but it will be at lower prices somewhere below $2 for IMAX and below $1 for AECO. Heading into the winter of 2012-2013, we may see $4 in the US and $3 in Canada.

Liquid natural gas? This is a tough one because we still don't know about those pipelines. Native land claims are big issue. He doesn't know how you play this on the pipeline or pipeline construction. There will be lots of ways to play once there is a game plan. He would go to the cheap side right now, which are the companies that own the gas that might go into the pipes.

Markets. Feels the correction is here. After the run we have had in the 1st quarter, we will go through a bit of a normal consolidation correction phase. There might be a pullback of 5%-10% and a bit of consolidation over the next month or 2 and then expects the upward projection will continue. Doesn't expect an increase in interest rates in 2013.